Sellers were not achieving their goals. Industry guidelines and peer group comparison indicated that 60% of the sales team should be attaining quota, yet in this case the inverse was true. Overall sales were trending down 6% a year while the market was growing. Sales leadership had been transitioned, turned over that is; yet the trend continued. Was it time for another shave of the sales leadership? That was the simplest answer, the CEO cited Occam’s Razor 1.
Digging into the data, some disturbing trends emerged, top performers were leaving the company. The same people who appeared in the top 60th percentile of quota attainment were leaving, year over year. When exit interviews had been conducted, the common reason for leaving was “better opportunity.” We put more research into the top performers who jettisoned over the past year. Forty-one percent had moved to competitive upstarts and related how they were continuing their success. Unanimously, all the exited top performers pointed to the enhanced or improved product they were now selling.
At the same time we were digging into win-loss details, this was a new concept for the organization. During the thirty plus interviews, we discovered buyers had a higher perception of competitive offers, service and value.
The findings were met with disbelief, denial by the executive team; this was a market leading firm, with superior products and services.
Our assessment continued to shave away at the executive hypothesis that sales needed a refresh. Marketing leads converted to 9% revenue, well below industry standards of 19-25%. Fewer prospects were evaluating products on this organisation's website versus others, and the numbers showed gradual erosion. Price compression, measured by average selling price, was 8% per annum. While the number of support calls remained flat, the number of escalations was rising monthly. We continued to accumulate evidence until we had shaved the executive hypothesis clean, exposing which product strategies needed refreshed.
Organisations often misdiagnose growth challenges as shortfalls of strategy or execution in marketing and sales. Sometimes it is hard to see the forest through the trees, when you’re standing in the forest. People often forget, William of Ockham’s original inductive razor referred to distinguishing between two hypotheses either by "shaving away" unnecessary assumptions or cutting apart two similar conclusions; it is not “the simplest explanation is usually correct.”
Want to know if your product strategy is keeping up with market conditions? Before your top talent jettisons? Ascendiosa can help.
Not all customers are created equal, some have a much higher propensity to buy. Can your team put a bullseye on those most valuable customers, focusing marketing, sales and support to ensure resources are allocated properly? Can your team create an ideal customer or buyer profile? Did you know that Ideal Customers are ten times less likely to churn or leave, than those that don't fit the profile?
Your most valuable customers cost less to acquire and are more profitable. Now, what attributes do they have? At the basic level there are five steps to identifying your most valuable customers.
Define the objective along with 5 to 7 variables that are distinct and contribute to the outcome. Test for dependency. Demographics or firmographics such as annual revenue, profit, industry, employees, people in the household, miles from a certain location, number of purchases, value of purchases, and so on. This exercise requires a fundamental understanding of the outcome and contributing variables. It also requires a certain amount of curiosity and bias aversion. Are there outliers, not in your current data set, that drive the outcome? Consider weather, commodities, consumer confidence, wholesale price index or other publicly available data.
Take all the data from your records, all the customers who bought in the past 6-months or year, filter out those 5 to 7 defined contributing variables and calculate the mean and standard deviation for each.
For every customer in the set, compute difference between the values in that customer and the entire set, divide by the standard deviation of the set. This yields standard scores between the variables so they can be compared on the same scale.
Next, compute the summary score for each customer or the average of its standard scores.
Order the customers from high to low based on those summary scores and the desired outcome. Watch for the patterns to emerge, you’re now ready to build your propensity to buy formula. Customers above the 80th percentile are your most valued customers. Now you can apply your resources to prospects who look like those customers; and focus your support efforts on the top 80th percentile.
Does this approach apply to B2B, B2C, and Non-profit? Yes. Start-ups or enterprise sized organizations? Definitely.
What if you don’t have the all data necessary? Companies like Dun & Bradstreet make a living compiling and cataloguing data on businesses. Geospatial and consumer data is more readily available today than ever before. If you need data to fill in some blanks, there’s a list for that.
Getting started requires your organization to do some primary research up front; structured interviews with personnel, buyers, consumers is a great place to start. Validate and refine the contributing variables. Be mindful of bias, look for the outliers. The reward for running this exercise is championship performance, can your team afford anything less? Ascendiosa can help.
Author: Mark Miller is Ascendiosa's Chief Commercial Officer
Often times private equity firms can squeeze value out of tarnished and known logos with stagnant growth trajectories. Efforts are mostly aimed at squeezing bloated operating expenses. Sometimes, it doesn’t work out so well, the most recent news on TPG and Silverlake’s woes with Avaya tell a great story.
This past week, reports in the Wall Street Journal1 and other sources swirled around the sale of Avaya’s contact center business to stave off bankruptcy. TPG and Silverlake acquired Avaya for $8Bn back in 2007, selling off the contact center business may bring in $4Bn, which could be applied in part to that pesky $6Bn of debt outstanding. Squeezing operating expenses was not enough or perhaps too much.
Revenue growth is fueled by great corporate and product strategies then propelled forward by sharp marketing and sales strategy and execution. When private equity firms buy tarnished logos, they replace the corporate heads, revise the strategy, slash expenses and often miss important factors when evaluating the product shortcomings and the market place in their due diligence. In the case of Avaya the evidence comes from loss of market share prior to private equity acquiring and Moody’s ratings agency reporting in August that Avaya “needs to constantly reinvest in new products and platforms to maintain its position.”
Today there is a tremendous amount of money in private equity, looking for undervalued companies. How can they tell if the product portfolio is too far gone? The keys can be found in:
Companies are failing faster these days as innovation accelerates and routes to market diversify; the number of tarnished logos will expand. As more money swells the private equity markets, competition for deals will accelerate. Sharpening the due diligence process and diagnosing the product portfolio capabilities as well as corporate talent, marketing and sales performance accurately can greatly enhance outcomes for private equity firms. Ascendiosa can help.
1. Avaya Weighing Bankruptcy Filing
Author: Mark Miller is Ascendiosa's Chief Commercial Officer